SembMarine to pay Societe Generale $115 mln to settle forex losses

CostasParis

SINGAPORE (MarketWatch) -- SembCorp Marine Ltd. (S51.SG) will pay France's Societe Generale (13080.FR) US$115.45 million to settle part of a US$303 million loss linked to foreign exchange trades made by its former finance director.

The payment marks the first step toward owning up to losses allegedly made by Wee Sing Guan, who was fired last month. SembCorp Marine has closed out the positions but has been criticized for failing to provide details on the nature of the transactions.

In a statement Monday, SembCorp Marine also said it injected S$300 million (US$207 million) into Jurong Shipyard, the subsidiary that engaged in the transactions.

A portion of the injection will be paid to Societe Generale to cover losses as well as interest on the outstanding obligation.

Analysts said the recapitalization of Jurong Shipyard is a welcome move to take responsibility for the losses - which exceeded the company's entire net profit of S$238.4 million (US$164 million) made in 2006.

"It shows a little more transparency on the part of the company," said Lisa Lee, an analyst at Nomura Securities in Singapore.

SembCorp Marine did not book any of the losses in the third quarter ended Sep. 30, but Monday's announcement suggests the company will soon account for the impact.

"I expect them to book all or part of the US$303 million in the fourth quarter," said Nomura's Lee.

Another analyst, who asked not to be named, said he has factored the entire loss into his valuation of the company.

"I have written off the entire US$303 million and the market should write it off as well," he said.

"SembCorp Marine has certainly got a team of lawyers working to recoup some of the money, but unless they find a loophole, the odds of getting anything back are almost zero."

SembCorp Marine said it is in talks with other banks among the 11 institutions involved in the trades, but it maintains the transactions are not binding.

The company has not identified any parties besides Wee who were involved in the investigation.

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